Thursday, June 05, 2014

First Draft of My Utopia

"You gentlemen who think you have a mission to purge us of our seven deadly sins, should first sort out the basic food positions…" (Bertolt Brecht)

[Please tell me what you think so I can incorporate your concerns in the next version.]

I've been obsessed with a utopia lately, and a number of pieces are falling into place. As I get older, my faith in markets increases, or at least my belief in their inexorability. Governments cannot govern in defiance or ignorance of market forces. But they should not simply "obey the markets" as some people think. Here's what I've been thinking:

First, there should be a basic minimum income, a monthly dividend paid out to everyone without prejudice or means testing of any kind. (In my radical utopia, every man, woman and child would receive the same amount from birth until death, but dependents would naturally hand their check immediately over to their guardians.)

Second, there would be no income tax and no sales tax of any kind. All money that is handed to you is yours and none of the state's business. All business would be transacted without any involvement of state agencies.

Third, since there would have to be come sort of taxation, to "cover the bill" or to control inflation as you prefer (the bill could always be covered simply through inflation since inflation is merely a hidden tax levied whenever the money supply is expanded), I would propose a land tax, i.e., a tax on the property that all owners of real estate in a certain sense fundamentally "lease" from the state that protects it with its military and police and all-around civilized behavior of the citizens who respect the fences after being properly educated and bribed with social benefits (like the unconditional basic income). It's only fair that land owners should pay for the convenience of merely having to put up a "private property" sign to enforce their claim.

Fourth, and finally, since the basic income is only worth whatever it can buy, the government would have to intervene in a number of markets to "control" prices, or, rather, to "index" the amount of the minimum income to the price of food, housing, and energy. This is where it gets good.

There already exist a number of perfectly good markets that would allow the government to influence the price of the things that every human being has a basic human right to purchase before making up his or her mind about where to contribute their labor. These markets provide a simple mechanism in which the government could exercise precisely the kinds of long-term prudence that politicians are currently and rightly being chastised for shirking their responsibility for.

There would be no need for rent control legislation. The land tax, wisely administered, would provide enough influence. If rents are too high (so that the basic income could not possibly purchase a decent month of adequate square footage) then the government would simply lower the tax on owner-occupied housing, incentivizing a switch from home rental to home ownership (since it would now become more attractive to own a property). This, of course, would drive property prices up, but it would have the effect of making more rental properties available, and therefore keep prices from rising.

Conversely, if rental prices are falling, the real estate tax could be increased. Now, this assumes that there is a government agency that monitors rental prices and has the power to determine the real estate tax. Obviously a distinction needs to be made between commercial and residential property, and, of course, the kind of business that is operating on a particular piece of land. A farm would be taxed in one way and factory in quite another. Taxes, in any case, would be determined in part by a concern about general inflation, and in part by its effect on the cost of housing.

It would be wise to determine how much of the basic minimum income should go to housing and how much for food (including water) and energy (electricity, gasoline, etc.) Once these proportions are fixed, and the "minimum" living standard has been determined (home, car, phone, internet, travel, caloric intake, meat, fresh veggies, etc.) the price of a number of basic commodities need to be placed under some control, just like rent). An individual will of course be free to have no home, become a beatnik, and just travel around in his or her car (spending the money on gas and grass) but the economic "range" of this freedom will be limited by its convertibility into, say, 50% rent, 25% food, and 25% power of a "decent" quantity.

This, then, tells us what the price of commodities should be, wheat, rice and pork bellies indexing for food, for example, and oil and electricity indexing for power. Now, all the government has to do is buy these commodities when prices get too low, and sell them when they get too high. It will often suffice to work through financial instruments like futures and options, but an ability to buy and sell at spot prices may also be necessary for some market. Here governments would need storehouses, which is a perfectly good idea anyway. In good times, the government would be storing up grain, and in bad times it would be selling it off. Prices would, correspondingly, remain stable.

This is a u-topia in the sense that it is probably never going to happen. It's a eu-topia in sense that it offers a free society, with free markets for the exchange of the products of human initiative, ingenuity and hard work. It would not force anyone into meaningless toil, producing wasteful products, simply in order to have the purchasing power required to survive and the only benefit accruing to very wealthy people who can convert the profits into actual quality of life.